Turkish economic growth dips as lira crisis darkens outlook

Finance Minister Berat Albayrak said, growth was driven by domestic demand despite a moderate slowdown in consumption and investments in the second quarter but the slowdown will become more visible from the third quarter. (Getty Images)
Updated 10 September 2018
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Turkish economic growth dips as lira crisis darkens outlook

  • Tayyip Erdogan has overseen strong growth during his 15 years in power but the economy is now facing challenges after a sharp decline in the lira
  • The government has been working on stimulus measures to stave off the expected slowdown in the coming quarters

ISTANBUL: Turkish economic growth slowed to 5.2 percent year-on-year in the second quarter, data showed on Monday, in what officials described as an economic rebalancing before an expected second-half slowdown as Turkey grapples with a currency crisis.
President Tayyip Erdogan has overseen strong growth during his 15 years in power but the economy is now facing challenges after a sharp decline in the lira, triggered partly by concerns about his influence over monetary policy.
In a Reuters poll, the economy had been expected to grow 5.3 percent in the first quarter. The lira firmed to 6.4550 against the dollar after the data from 6.4850 beforehand.
Second quarter gross domestic product (GDP) expanded a seasonally and calendar adjusted 0.9 percent from the previous quarter, data from the Turkish Statistical Institute showed. Last year the economy grew 7.4 percent.
Growth was driven by domestic demand despite a moderate slowdown in consumption and investments in the second quarter but the slowdown will become more visible from the third quarter, said Finance Minister Berat Albayrak.
Rabobank emerging markets forex strategist Piotr Matys said that, given concerns over the economy overheating, the slowdown from 7.3 percent in the first quarter could be seen as encouraging.
“The Turkish economy is widely expected to lose even more momentum in the coming quarters as a result of significant lira depreciation,” he said, adding that attention was focused on the central bank’s rate-setting meeting on Thursday.
Investors expect the central bank to raise interest rates, but the size of the hike will be crucial, Matys added. The bank left rates on hold at its last meeting in July, defying expectations of a hike.
Data last week showed inflation surged to 17.9 percent year-on-year in August, its highest level since late 2003, prompting the central bank to signal it would take action against “significant risks” to price stability.
In the second quarter, the agricultural sector shrank 1.5 percent year-on-year while the industry sector grew 4.3 percent, the construction sector grew 0.8 percent and services expanded 8 percent.
According to a Reuters poll, the economy is expected to grow 3.3 percent in the year as a whole.
The government has been working on stimulus measures to stave off the expected slowdown in the coming quarters. Erdogan, a self-described “enemy of interest rates,” has pushed banks to lend more to boost private spending.
His demands for lower interest rates have fueled concerns that the central bank lacks independence. The lira has tumbled 41 percent against the dollar this year in a slide exacerbated by a bitter diplomatic row with the US.
Officials have said they expect a contraction of the economy in the third quarter and full-year growth of around four percent — below a 5.5 percent government target.


Oil eases from 4-month high on global growth worries

Updated 2 min 56 sec ago
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Oil eases from 4-month high on global growth worries

  • The losses came amid worries over global economic growth after the US Federal Reserve highlighted signs of a slowing economy
SYDNEY: Oil prices edged lower on Thursday, retreating from a four-month peak, as fears of a slowing global economy weighed on market sentiment.
US West Texas Intermediate (WTI) crude futures were at $60.16 per barrel at 0040 GMT, down 7 cents, or 0.1 percent, from their last settlement. WTI had earlier hit a high of $60.19 a barrel — the highest since November 12.
International Brent crude oil futures were at $68.47 a barrel, down 3 cents from their last close. Brent touched $68.57 a barrel on Wednesday, its highest since November 13.
The losses came amid worries over global economic growth after the US Federal Reserve highlighted signs of a slowing economy.
Markets have been underpinned, however, by efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to curb supply, and losses were checked as widely watched US data showed supplies were tightening.
“Oil markets appear convinced that the continued effects of the Saudi Arabia oil production cuts and falling exports to the US will continue to outweigh the concerns of rising US production,” said Alfonso Esparza, senior market analyst at brokerage, OANDA.
US crude oil stockpiles last week fell by nearly 10 million barrels, the most since July, boosted by strong export and refining demand, the Energy Information Administration said on Wednesday.
Stockpiles fell 9.6 million barrels, compared with analysts’ expectations for an increase of 309,000 barrels. The draw brought stockpiles to their lowest since January.
Gasoline and distillate inventories both fell by more than expected. Gasoline stocks fell by 4.6 million barrels, while distillate inventories fell by 4.1 million barrels.